Why JetBlue is Seeking Blue Skies

Report Overview

In a victory of sorts, JetBlue managed a slim Q4 profit. It wasn't a fantastic performance, but this reversed an operating loss in 2023’s fourth quarter. Might it mark the start of a much-needed turnaround? JetBlue delivered its earnings presentation a day before Frontier launched a new bid to buy Spirit. Will it consider a revised offer too? Or could JetBlue itself become an acquisition target? In this week's feature story we examine the latest ups and downs at New York's Hometown Airline.

Pushing Back: Inside the Issue

We regrettably begin with a tragedy. The Washington D.C. crash involving an American Eagle regional jet, operated by American's subsidiary PSA, left the industry in sadness and shock. It was the first major U.S. airline accident since 2009, and its deadliest since 2001. The thoughts of the entire Airline Weekly team are with those affected.

As investigations ensue, the industry’s broader strategic maneuvering has reached a fever pitch. Frontier is trying again to buy Spirit, after nearly reaching a merger deal—one undisclosed at the time—this past summer. Spirit, now in bankruptcy, says it sees the logic in merging with Frontier but doesn’t like the new terms.

Frontier’s latest move could rekindle romantic flames for JetBlue, Spirit’s former fiancée. The New York-based airline, struggling to earn sufficient profits, hinted that it wants to closely partner with someone. Does that just mean a revived partnership with American? Does it suggest revived interest in Spirit? Maybe something more mundane? Or maybe something doubly spectacular—rumors circulated momentarily of a possible merger with United! After all, United would love to reestablish a New York JFK presence, would love to fortify its northeastern strength around its Newark hub, and would love to devise a grand plan to finally surpass Delta in the earnings sweepstakes. Alas, United made clear that it's "not in negotiations or discussions with any other airline regarding a merger, acquisition, or similar strategic transaction and has not been in any recent discussions with any airlines regarding the same." Alright then.

There’s consolidation abuzz in Europe too, with Lufthansa announcing a small future ownership stake in Latvia’s airBaltic. The transaction involves convertible shares, valued at 10% of airBaltic’s equity. If the latter follows through on an eventual public share offering, Lufthansa would own at least 5%. Their partnership will also see Lufthansa lease more of airBaltic’s A220s—with crews—to expand capacity in the summer peak. Also, it ensures that more Baltic area longhaul demand is pumped through hubs like Frankfurt or Zurich, rather than a oneworld or SkyTeam hub. 

It was also a busy week on the earnings front. JetBlue was joined by (among others) Southwest (we’ve got a cost problem), Ryanair (Britain’s government is nuts), Wizz Air (we’ve still got major engine problems), and Latam (it was another banner year). Read on to learn more.

The Airline Weekly Lounge Podcast

Weekly Winners and Losers

— Jay Shabat and Gordon Smith

Weekly Skies

Frontier Wants to Marry Spirit… Again.

• Courtney Miller of Visual Approach Analytics called it the least surprising surprise of 2025. Frontier is trying to buy Spirit again, reviving a pursuit it began three years ago. In February of 2022, Frontier reached a deal to merge with Spirit. But JetBlue stepped in and won a bidding war, leaving Frontier abandoned at the altar. JetBlue’s merger, however, was ruled illegally anticompetitive last January. Last summer, Frontier and Spirit revived talks and even reached a merger agreement in principle. But it got cold feet and Spirit, left on its own, filed for bankruptcy in November. Then, on Jan. 7^th (as we learned last week), Frontier submitted a new merger proposal, naturally much less lucrative than the previous ones. 
• This time, Spirit said no thanks. Frontier’s proposal, it said, would deliver less value to Spirit’s stakeholders than the standalone reorganization plan it’s currently enacting. It also cited the need for regulatory and court approvals. And it’s conditioned on unnamed investors contributing $350m in new equity, “which they were not willing to do based on the terms of the proposal.” And so, Spirit has “determined, barring new developments, not to further delay its planned emergence from Chapter 11.” The restructuring, it insists, is advancing as planned toward significantly reducing the airline’s debt.
• Remember, Spirit’s bankruptcy plan is unlike most airline bankruptcies of the past. It’s designed primarily to address the suffocating debt load it amassed during the past five years. It’s not renegotiating any labor contracts or undertaking wholesale rejection of supplier contracts. This means it can get through the court process quickly—it expects to exit before the end of this quarter (in other words, sometime before April 1^st). 

• On Feb 13^th, Spirit’s bankruptcy judge will hold a hearing on Frontier’s plan, giving the Denver-based airline a chance to convince Spirit’s lenders to accept its offer. It’s already argued that “Spirit's standalone plan will likely result in an unprofitable airline with a high debt load and limited likelihood of success.” A combined Frontier-Spirit, it said, would be the fifth largest U.S. carrier, on its way to flying 100m passengers with a fleet of 400 planes. It would create a more valuable loyalty program. It would create a stronger platform to grow. It would facilitate each carrier’s goal of winning more premium travelers. It would lead to “thousands” of new markets, an improved market position at key airports, and cost synergies “enabling customers to save billions compared to the prices charged by the Big Four [Delta, United, American, and Southwest].
• Frontier estimates that the equity value of the combined company (based on its projected earnings and debt) would be about $9.2b. Spirit’s creditors would get Frontier stock worth about 19% of that figure. To this, Spirit’s management replied: “We believe that your economic proposal is far short of what our stakeholders would support.” In the tentative merger deal reached this past summer, before the bankruptcy, Spirit’s creditors were to get 27% of the combined company. Spirit also expressed uncertainty about whether Frontier would want to renegotiate labor contracts or terminate supplier contracts, which would prolong the bankruptcy stay. All of that said, Spirit told Frontier that “we share your view on the logic of a combination of our companies.” It’s willing to talk more but “we would need to move very quickly.” 
• Overall, Frontier envisions at least $500m in revenue synergies, plus another $100m in cost synergies—note that airline mergers tend to boost revenue more than they lower costs. What will Spirit’s creditors ultimately select: 100% ownership of Spirit or 19% ownership of a combined Spirit-Frontier? Or maybe, the two sides will agree to new terms. The rest of the industry will be watching.

Southwest Battles Cost Inflation 

• ​​“While we are pleased with our progress, we are far from satisfied.” So said Southwest as it unveiled a 6% operating margin for last year’s fourth quarter but just a 2% margin for the full year. Like all other U.S. carriers that reported so far, Southwest’s Q4 results showed substantial y/y improvement as industry capacity contracted and fuel prices dropped. Still, “Our cost performance… is not where we want it to be.” And so, it’s “taking immediate actions” to more quickly achieve the $500m worth of cost savings it’s targeting by 2027. It now aims to achieve a non-fuel unit cost inflation of “in the low single digits” this year. In the current January-to-March quarter, though, CASM ex-fuel will be up an estimated 7% to 9%.

• Unit revenues, meanwhile (RASM), should be up 5% to 7% this quarter. Southwest is now shrinking, remember, and plans to grow ASM capacity just 1% to 2% annually over the next few years. The exact pace of growth will depend on how fast Boeing can deliver its Maxs, including Max 7s which haven’t yet been FAA certified. CEO Bob Jordan said he’s pleased with progress at Boeing but uncertainty remains. Boeing’s production problems, of course, along with other supply-side manufacturing constraints, will likely constrain industry capacity in the “years ahead.”
• Unhappy with Southwest’s meager post-pandemic profit margins, the investment fund Elliott attempted a management coup last fall. Tensions ended with a shakeup of the airline’s board of directors. In the meantime, Southwest unveiled a new business plan featuring assigned seating, premium seating, red-eye flying, a new partnership with Icelandair (with more partners to come), new distribution initiatives, improved revenue management, quicker aircraft turns, etc. It also has an updated credit card deal with its partner Chase Bank. And it’s selling excess planes at a nice profit.

Ryanair Sees Strong Demand, Tight Capacity 

• Ryanair managed a small operating profit in the offpeak October-to-December quarter, reversing a small loss in the same quarter a year earlier. Its positive 1% operating margin came courtesy of strong close-in bookings during the Christmas and New Year holiday period. Note also that a year ago, several online travel agencies stopped selling Ryanair’s flights in response to legal and regulatory pressures. At the time, the airline said it welcomed their action, accusing them of “overcharges” and “refund scams.” It has since reached an agreement with some agencies, recovering some of the lost demand.
• OTA bookings are a small part of Ryanair’s business though, and the far more substantial impediment to its traffic growth are the Boeing delivery delays it continues to experience. That’s forced it to revise its annual traffic target from 210m to 206 million. “We had originally expected 25 aircraft for summer 2025 but… now we’re back to nine aircraft.” 
• Interestingly, Ryanair said Boeing’s current bottleneck is transporting fuselages from Wichita (home of Spirit Aerosystems) to Seattle. “We are reasonably hopeful that… they will build back up their production reasonably quickly, and we’ll be back up at 38 aircraft by the end of the summer.” It’s referring there to the monthly build rate for the Max, which it said could reach around 42 a month by the fall, pending FAA approval. “There are no supply chain issues with that.” 
• One supply chain issue that does remain, according to Ryanair, is a shortage of engine maintenance capacity—Ryanair itself plans to open one of two new in-house engine maintenance facilities over the next 12 to 18 months. As of the start of 2025, the airline had taken 172 of its 210 Max-8200 orders. It has another 150 firm orders for larger Max 10s, or as many as 300 including options. It expects the FAA to certify the Max 10 in the second half of this year. It expects to receive its first Max 10 in advance of the 2027 summer season. Does Ryanair get compensation from Boeing for these chronic delays? Yes, but CEO Michael O’Leary brushed this off as “very modest.”
• Ryanair wishes it had more planes than it does. But it’s nevertheless enormous, with more than 600 aircraft in service, flying to more than 230 airports across Europe and its periphery, including the Middle East and North Africa. It’s eager to jump back into Ukraine when safe to do so, reallocating planes from other markets if necessary. Ryanair is unlike any other airline in the world in that a chief driver of its capacity allocation is where it can obtain the lowest costs. That means growth directed toward countries and airports that incentivize it to come. “Over the coming year… we’ll allocate this scarce aircraft capacity growth to those regions and the airports who are investing in growth by cutting or abolishing aviation taxes as they are in Poland, in Sweden, and in Italy, and those airports who… incentivize traffic growth.” It mentioned a new Croatian base in Dubrovnik that’s performing “very well.” Looking ahead to the April-June quarter, Ryanair’s largest country market is still Italy. Markets where it’s growing seats at a double-digit annual rate include Poland, Portugal, and Hungary. On the other hand, seats to France and Germany will decrease.

• Though normally timid, diplomatic, and reserved (hahaha), Mr. O’Leary opened up about government policies and rival airlines. He was at his most acidic when describing British aviation policies, specifically the country’s air passenger duties (APD). The new Starmer government raised the APD, which O’Leary said “immediately damages air travel to and from the U.K.” He accused officials of “distracting everybody” by supporting a third runway for Heathrow, something that “may or may not be delivered in my lifetime. I wouldn't hold my breath.” He added, “If that government is serious about growth, they should be scrapping APD and stop worrying about a third runway in Heathrow.” There’s lots of runway capacity still available, he said, at airports like London Stansted and in regional cities like Manchester, Bristol, and Glasgow. “It highlights why the U.K. is so kind of completely out of touch.” And just in case he wasn’t clear: “Delusional stuff like raising taxes at a time when other EU economies are scrapping aviation taxes, and then talking about a third runway in Heathrow in thirty years’ time, it's all meaningless nonsense.”
• O’Leary was no less strident about Germany’s aviation policies. Nor did he go easy on easyJet, which he said was avoiding competition with Ryanair and “buying aircraft at ludicrous prices.” Wizz Air, meanwhile, is hobbled by Pratt & Whitney engine issues, which—combined with Boeing and Airbus delays plus industry consolidation—will keep “European short-haul capacity… heavily constrained in 2025.”
• Like all airlines, Ryanair has confronted lots of post-pandemic cost inflation. And Boeing’s delays haven’t helped—those Max jets, and the growth they enable, are critical weapons in combatting higher unit costs. But it’s not exposed to rising aircraft lease prices, and its balance sheet is so strong that it earns more interest than it pays. Total unit costs should be “broadly flat” for the fiscal year that ends in March.

Other Earnings Highlights 

• Latam enjoyed another great quarter and another great year, building on its admirable performance post-bankruptcy. Its Q4 operating margin was 13%. Its full-year 2024 operating margin was 12%. Naturally, Latam is watching developments between Gol and Azul, while noting their merger talks are non-binding for now, and don’t feature much detail. In the meantime, demand looks good across most regions and segments, with Brazil’s cheap currency attracting lots of other South Americans–notably from Argentina–to connect through hubs like Sao Paulo. The one market that’s currently distressed is Colombia domestic, due to overcapacity. The U.S. to Brazil, it noted, had some excess capacity this peak season following American’s addition of new seats. Back on the positive side, the airline’s Latam Pass loyalty plan continues to grow at a welcome pace, reaching almost 50m members.

• Wizz Air reported a negative 6% operating margin for the offpeak fourth quarter. But thanks to a strong third quarter, its full-year margin was positive 10%. That’s well below its ambitions, however, and well below the 16% figure it earned in calendar-year 2019 (that was three points better than even Ryanair that year). Wizz Air’s CEO József Váradi sounded despondent as he spoke despairingly of the damage to the airline’s business caused by grounded Airbus Neos. The main cause is Pratt & Whitney’s GTF engine inspections, but he also cited Airbus delivery delays. Roughly 40 of its planes are on the ground at any given time, a figure that won’t change much this year. “[The] GTF cost headwind will unwind over the next two years.” Wizz by the way will need to select which engines to use—either the GTF or its rival product from CFM—for future A321neos on order. In a few years, it expects to fly only the A321neo. It’s deferring some deliveries, however, while pointing out that it will still outgrow Ryanair in the years to come. Wizz says a return to capacity growth will greatly help control unit costs. It also sees strong demand and a favorable competitive environment. New capacity will focus on existing markets, not so much new ones—“densification, not diversification.”
• Icelandair lost money last year, never a welcome development. It did however cut losses in the offpeak fourth quarter as fuel prices declined, more tourists came to Iceland, and the competitive environment turned more favorable. It’s expecting a full-year 2025 operating margin of between 2% and 4%. It’s certainly busy on the strategic front, partnering with carriers like Southwest and Emirates, adding new planes (see below), boosting cargo profits, and adding new routes like Nashville, Istanbul, and Gothenburg. It currently sees “robust demand across all markets.” This includes strong demand for its Saga premium seats.    

— Jay Shabat and Gordon Smith

Routes and Networks

Icelandair’s A321LR Addition

• Icelandair is putting its new long-range aircraft to good use, with a route to Miami. The seasonal service will fly three-times weekly on Tuesday, Thursday, and Saturday from October 25, 2025 until March 2026. The flight will be operated by the carrier’s latest addition, the Airbus A321LR and have a scheduled journey time of around eight hours. 
• The Icelandic carrier has long served Orlando, with Miami its second city in Florida. Come October, it will be the airline’s 19th destination in North America. Icelandair has long leveraged its strategic location in the North Atlantic to funnel transit passengers. While some travelers will visit Iceland itself, the majority are expected to connect onwards to one of the 34 European cities in the Icelandair network. Reykjavik will be Miami International Airport’s 21st European destination. 

Porter Boosts NYC Network

• Canadian airline Porter is expanding in New York. A year-round service will connect its Toronto Pearson base with LaGuardia from May 1. There will be up to three flights a day, with Porter using the U.S. airport’s new Terminal B. As well as point-to-point traffic, Porter’s interline partnership with JetBlue will allow connections at LGA across the southern United States. 
• The Embraer E2-operated link complements Porter’s existing New York area services. The airline has served Newark since 2008 with Q400 flights from Toronto’s downtown Billy Bishop Airport. More recently, it added flights from Ottawa to Newark. Once the new LaGuardia service goes live, Porter will operate up to 15 roundtrips a day to and from the New York area. 

Movements in Mexico

• Aeromexico is adding two new U.S. routes for summer 2025. The first, from Mexico City to Philadelphia, will begin on June 5, and operate daily. On the same day, a new link from San Luis Potosi in central Mexico to Atlanta will begin. The Philly service will be operated by 737s, with the Atlanta route served by Embraer 190s. 
• The additions follow a ramping up of a joint cooperation agreement between Aeromexico and Delta. From June, the pair will operate 57 routes with a total daily operation of more than 90 flights. According to the Mexican flag carrier, Philadelphia is the largest U.S. market currently without direct service to Mexico City. The airline added Boston, Newark, and Washington D.C. to its network last year.

Emirates Brings A350s to India

• Emirates new Airbus A350 made its Indian debut last week. The airline is operating the aircraft on daily flights to Mumbai and Ahmedabad. The cities join three other destinations where Emirates has deployed the A350, after Edinburgh, Kuwait, and Bahrain. Emirates also operates the A380 on the daily services to Mumbai and Bengaluru. The airline currently flies to nine destinations in India with a total of 167 flights per week.

— Gordon Smith

The Stock Take

Fleet

Angola Joins the 787 Club

• TAAG Angola Airlines accepted the first of four Dreamliners last week. The aircraft – on lease from AerCap – arrived in Luanda 50 years after the carrier accepted its first-ever plane, a Boeing 737-200. Nelson Pedro Rodrigues de Oliveira, CEO of TAAG, described the new jet as “a pivotal step in our strategy to modernize.” The African carrier also used the new arrival to debut a fresh livery. 
• The -9 variant will replace the carrier’s aging widebody fleet. TAAG currently operates five 777-300ERs and three 777-200ERs. It also has seven 737 NGs. The airline says the 787s will help expand its long-haul network, with plans to launch new routes to Europe and “explore opportunities in Asia and North America”. TAAG currently serves 12 destinations in Africa, Europe, South America, and China. Boeing's most recent Commercial Market Outlook projects Africa will need 1,170 planes over the next two decades. 

Korean Air’s New Flagship

• The Airbus A350 is now flying with Korean Air. On January 27, the type made its commercial launch at the carrier on the Seoul Incheon to Osaka route. The aircraft – a -900 variant – will fly between the South Korean capital and Osaka twice daily. A second A350 will serve the southern Japanese city of Fukuoka daily. 
• The A350’s arrival comes as Korean Air ramps up its integration efforts with Asiana Airlines. The latter is already a well established A350 operator. As the project gathers pace, a streamlining of single and twin-aisle fleets is expected. Korean Air said after Japan, the A350s will serve Taipei in March, and long-haul destinations, including Madrid and Rome, in the second half of the year. The airline has configured the new jets with 28 Prestige Class seats and 283 in economy. Korean Air will ultimately operate both A350-900 and -1000 variants.

— Gordon Smith

Talking Tech

Our regular round-up of the latest airline technology news and trends

Air India’s AI Booking Bot

• With the rise of autonomous ‘agents’ that can reserve flights and hotels, Air India is rolling out its own chatbot to speed up the booking process. Called ‘eZ Booking,’ passengers can type or speak a description of their trip (e.g. “London to Delhi next Tuesday”) and it will promptly reach a booking summary page. There, customers can book the selected flight, add more details to a prompt (e.g. “earliest arrival,” “direct” or “lowest price”), or manually change details. 
• The service is currently available to Maharaja Club loyalty members, with broader access coming soon. When tested by Airline Weekly, the chatbot was impressively quick to respond to prompts and provide results, but did default to literal rather than logical choices. For instance, the earliest departure could mean a connecting flight, adding significant time. However, the ability to add more detail, which the bot prompts, alleviated this to a large extent. 
• Air India is in the middle of a five-year turnaround plan which includes a goal of being the “most technologically advanced” airline in the country. Generative AI integration is seen as key to boosting passenger satisfaction.

Iberia Launches Accessibility App

• Iberia’s new ‘Háblalo’ app is looking to make travel more accessible to the millions of passengers who have communication difficulties. The app allows travelers to transcribe a message with text or voice and translate into eight languages to better communicate with ground staff and crew. It includes scores of frequently used prompts to reduce the need to type basic queries.
• A promotional video shared by the airline features a man with cerebral palsy efficiently navigating through check-in, boarding, and onboard using the app’s features. From requesting a change of seats to ordering beverages, the app aims to make independent communication easier for those with physical, visual, hearing, or cognitive challenges. 
• Háblalo is part of Iberia’s broader accessibility push, which includes dedicated call center operators for those with difficulties. The airline has drawn feedback from several key organizations to develop the program, including the Spanish Paralympic Committee and Spanish Confederation of Autism.

JetBlue Signs Venmo 

• As mobile payments grow in popularity, JetBlue is the first major carrier to accept Venmo for flight booking. Travelers can now checkout using their Venmo balance or pay through saved cards and bank accounts. The option is currently available on JetBlue’s website with app integration coming soon. As Venmo is owned by PayPal, it opens the possibility for further integration as the platform develops. 
• U.S. airlines traditionally stuck to cards for payment, however mobile wallets are becoming more common with younger consumers. United recently partnered with Paze for payments, a competitor backed by major banks which also created peer-to-peer payments app Zelle.

Copa Partners with Smartvel

• Panamanian flag carrier Copa Airlines is teaming up with Smartvel to provide key entry information to travelers flying any of its 32 destination countries. The Madrid-based travel content firm’s tool updates guidelines from government websites to provide real-time health and visa requirements.
• The tech also allows Copa to leverage Smartvel’s partnership program, which includes selling ancillary services such as insurance and visa assistance. Smartvel has had a busy two years, with a series of new acquisitions and clients.

— Pranjal Pande

Departures & Arrivals

Notable vacancies, appointments, and retirements from across the industry

Acting FAA Chief Appointed

• FAA Deputy Administrator Chris Rocheleau is stepping up to be acting head of the agency. Rocheleau, a former executive of the National Business Aviation Association and U.S. Air Force veteran, has worked at the FAA for over 20 years. President Trump described him as “A 22-year veteran of the agency, highly respected.” Former FAA chief Mike Whitaker, who was unanimously confirmed by the Senate in October 2023, resigned from the top post January 20, on Trump’s Inauguration Day.

Senate Confirms Transport Sec

• The U.S. Senate confirmed Sean Duffy, a former representative and Fox Business host, as Transportation Secretary by a vote of 77 to 22. In his new role, Duffy will oversee safety-related issues at Boeing, an aging National Airspace System, a persistent air traffic controller shortage and a slew of consumer regulations passed down from the Biden administration. It is unclear if the Trump administration will scrap many of the consumer regulations put in place by the Biden administration such as automatic refunds, hefty fines and free family seating.
• Duffy’s confirmation was met with approval from the airline industry. Nick Calio, the president of trade group Airlines for America said: “Sean Duffy is the right person at the right time to lead our nation’s transportation and infrastructure systems, and we are excited to get to work with him at the helm of the Department of Transportation.” Meanwhile, the U.S. Travel Association said it believed Duffy would “bring strong leadership” to the DOT.

— Meghna Maharishi and Gordon Smith

Picture Perfect

Our favorite image from the week’s global airline developments

Qantas has shared this eye-catching selection of retro and present-day uniforms to mark a major re-branding project. The Aussie flag carrier is embarking on its first uniform redesign in over a decade. Qantas said last week it is searching for a new Australian designer “to take it into the next era.” It comes as the airline overhauls its fleet and “prepares to conquer the final frontier of aviation with the launch of Project Sunrise.” Over the coming weeks, Qantas will start surveying its uniformed workforce of more than 17,500 employees.

— Gordon Smith

Feature Story

Seeking Blue Skies: JetBlue Plots a Turnaround 

In a victory of sorts, JetBlue earned a fourth quarter operating profit… barely. But this at least reversed an operating loss in 2023’s fourth quarter. Does it mark the start of a much-needed turnaround?

For perspective, JetBlue earned a 4% operating margin in Q4 of 2022, and an 11% operating margin in Q4 of 2019. Looking at annual results, last year was a forgettable one, blemished by a $245m net loss ex special items, and a negative 1% operating margin. What makes this red ink particularly uncomfortable is that it coincided with strong demand, a strong economy, and relatively low fuel prices. If JetBlue can’t make money in those conditions…

Then again, it’s not alone in its anguish. Other U.S. LCCs faced similar trouble last year, ranging from heavy non-fuel cost inflation to changing travel trends—many Americans chose to fly overseas last year. Notwithstanding its handful of European routes, JetBlue was largely confined to serving domestic and shorthaul Caribbean/Latin markets. It faced a slew of other setbacks and challenges too. A federal court stymied its plan to buy Spirit. Another federal court declared its domestic joint venture with American illegal. Air traffic controller shortages wreaked operational havoc on flights in the northeast and Florida. Ultra-LCC fare wars pressured Florida routes in early 2024. 

Also, Pratt & Whitney engine woes upended JetBlue’s fleet plans throughout the year. On average, 11 of its Airbus Neos were grounded at any given time last year, slicing an estimated 2.5 points from its annual operating margin. If accurate, JetBlue would have made an operating profit last year. As management explained in its earnings call last week, the P&W engine issue has caused overstaffing, lost profit opportunities, and the need to extend costly leases for older Airbus planes.

Frankly, many parts of JetBlue’s network were performing poorly. Judging from the route restructuring now underway, Los Angeles LAX and Newark were big money losers. Contraction in Fort Lauderdale signals some trouble there. Transatlantic flying will become more seasonal. This quarter, its seats from New York LaGuardia and Washington Reagan will be down 61% and 18% y/y, respectively, according to Cirium Diio. That’s as it unwinds in these markets following the American divorce. LaGuardia is a business-heavy airport, and JetBlue wants to focus more on leisure and family-visit travel. No more business routes like New York-Kansas City or Boston-Minneapolis. For that matter, no more service at all to 15 airports, including Kansas City and Minneapolis (Baltimore, Burlington, Bogota, and Burbank are a few others; is it something about the letter “B”?).

As it turns out, “B” as in Business traffic is now stealing the show industry-wide, with corporate travel resurgent. Delta, United, and Alaska all made this clear in the past few weeks. And while leisure travel seems to be holding firm as well, JetBlue isn’t well positioned to benefit from the corporate upsurge. Helpfully, Spirit’s bankruptcy removes a lot of overlapping flights and seats. Last week’s big announcement from Frontier—that it’s trying again to buy Spirit—could result in further capacity reductions and upward fare pressure. 

For now, though, Frontier is more hurtful than helpful, expanding aggressively in key JetBlue markets like Boston and San Juan. It even entered JFK airport in New York, attacking JetBlue routes to Florida, Puerto Rico, Atlanta, and Las Vegas. But it’s not just Frontier.

Across the industry, capacity from New England to Florida is up 21% y/y this quarter. New England to the Caribbean is up 29%. This reflects Frontier’s aggression in Boston, yes, but also moves like Breeze expanding from Providence, Avelo adding flights from New Haven and Hartford, and Allegiant doing more from Bangor and Portsmouth. JetBlue itself sees New England as home turf, hoping for a better year than the Red Sox or Patriots. Its New England seats to Florida and the Caribbean this quarter are up (gulp) 39%. No surprise, therefore, to hear the airline say that Boston unit revenues are underperforming other areas of the network right now. As a Boston might say, it’s a Fare Wah. 

"JetBlue will need some Tom Brady quarterbacking to turn things around..."

JetBlue will need some Tom Brady quarterbacking to turn things around. Or maybe some David Ortiz home run power. Or maybe a plan called JetForward. Unveiled in September, JetForward aims to boost operating profits by as much as $900m over the next three years. Components of the plan include the aforementioned route restructuring, plus efforts to improve operational reliability, add new loyalty and distribution partners, introduce a new premium credit card, open JFK and Boston airport lounges, raise new capital and cut additional costs. CEO Joanna Geraghty said the total number of initiatives exceeds a dozen.

Importantly, the airline deferred delivery of 44 A321neos from 2025 to 2029/30, thus postponing some $30b in capital spending. E190s will be gone after this summer’s peak, replaced by additional A220s—it plans to get 20 more this year and 20 more next year. These A220s, management says, have 30% lower unit costs than the E190s, and with a lot more premium seats to sell. On a less cheerful note, engine problems on the Neos remain a problem. This year, it expects groundings to be in the mid-to-high teens on average. The problem, in other words, will get worse before it gets better. Indeed, not having those planes will slice an estimated three percentage points from 2025’s operating margin.

Some of JetBlue’s biggest and boldest changes are evident within its aircraft cabins. Having long offered a longhaul first class product called Mint, it’s now planning a domestic first-class debuting next year. It separately relaxed bag rules for its cheapest Blue Basic fares and enhanced its EvenMore offering to include dedicated overhead bin space, complimentary alcoholic beverages, and a premium snack. Clearly, JetBlue like others is leaning into the premium trend, convinced it’s here to stay.

"The problem, in other words, will get worse before it gets better..."

Last year, the carrier said, was a year of transition, and frankly one that ended better than expected. In October, it warned that Q4 revenues would drop as much as 7% y/y. It later gave 5% as its worst-case scenario. Instead, they declined just 2%, with help from strong demand—especially close to departure—during the November and December holiday peaks. Flights to Europe and the Caribbean/Latin America saw solid unit revenue gains. Transcon routes were healthy, boosted by strong Mint bookings. Revenues tied to JetBlue’s loyalty program now account for 12% of the company’s total, up significantly from 2019. Cheaper-than-expected fuel also helped last quarter. So did Spirit’s bankruptcy and other competitive tailwinds, notwithstanding the Q1 capacity pressures discussed above (i.e., the Boston Fare Wah).

If all goes to plan, JetForward’s synergies will really kick in gear during 2025. Still, it only forecasts a breakeven operating result for the full year. It didn’t provide margin guidance for just the current January-to-March quarter. But it did unnerve some investors with its caution that unit revenues might drop about half a point y/y, presumably because of all that additional New England capacity (and keep in mind that Q1 won’t have Easter this year). At best, it thinks Q1 RASM will increase 3.5%. Unit revenue gains should be easier at a time when the carrier’s total ASM capacity is shrinking 2% to 5%. Of course, that also makes it tougher to control non-fuel unit costs, which are expected to jump 8% to 10%. It’s this uninspiring guidance that caused JetBlue’s stock to tumble, from above $8 per share before the update, to below $6 shortly thereafter.

"If all goes to plan, JetForward’s synergies will really kick in gear during 2025..."

Undeterred, Geraghty and her team say they’re meeting or exceeding their JetForward targets. Two new European destinations—Madrid and Edinburgh—come online this summer. Other new routes should start delivering profits following a maturation period. JetForward, it said, combined with the adjustment for the Neo groundings, should add nine points of operating margin improvement from 2025 on.

Most interestingly, Geraghty—asked about a replacement for its American relationship—said this: “We’re having conversations with a number of carriers right now to discuss the potential for a future partnership.” She added that the judge who ruled against it “laid out a framework that would be acceptable… That’s what we’re looking at, but there's nothing to announce now.” Hmm. 

JetBlue, for the record, delivered its earnings presentation one day before Frontier launched its new bid to buy Spirit. Will Geraghty reconsider a new bid as well, this time at a much lower cost with Spirit now in bankruptcy? Might one of the Big Three carriers (United, American, or Delta) find JetBlue an interesting acquisition target? Southwest?

With all due respect to its New York customers, money-losing JetBlue needs some new ways–involving consolidation or otherwise–to stage a Brady-like comeback.

— Jay Shabat

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